Michael Pinedo Page 1 Operations Management – Spring 16 Prof: Michael Pinedo

STERN SCHOOL OF BUSINESS

COURSE SYLLABUS OPMG-UB.0001.002

(DRAFT September 2015) – STILL SUBJECT TO REVISIONS!)

Spring 2016

MEETINGS: OPMG-UB.0001.02 Monday/Wednesday 2:00 PM – 3:15 PM ROOM: Tisch 201 INSTRUCTOR: Dr. Michael Pinedo, Room KMC 8-65, (212) 998-0287

mpinedo@stern.nyu.edu OFFICE HOURS: Monday 5-7 PM (or by appointment) TEACHING FELLOW: Dmitry Mitrofanov dmitrofa@stern.nyu.edu OFFICE HOURS: Time TBD (Room: TBD)

Michael Pinedo Page 2 Operations Management – Spring 16 Prof: Michael Pinedo

COURSE MATERIALS

CUSTOM TEXT (Optional): Competitive Advantage from Operations (Seventh Edition) a customized text created for Stern students containing Chapters from Heizer and Render, Operations Management, 10th edition, Prentice Hall, 2010. This package was prepared by Pearson Custom Publishing.

CASEBOOK (Required): containing two Harvard Cases. This Case Book has to be purchased at the bookstore.

• NATIONAL CRANBERRY • L.L. BEAN, INC.

CASEPACKET (Downloadable from NYU Classes): The following list of documents includes NYU, Columbia and Stanford Cases and Readings. This packet is downloadable from NYU classes under Resources/Documents/Case Folder.

• ANALYSIS OF OPERATIONS • KRISTEN’S COOKIES CASE • PANAMA CANAL • FCN SECURITIES DEMO (A), (B) AND (C) • NETWORK CASES • WAITING LINE MANAGEMENT TABLE • THE RITZ-CARLTON CASE (Columbia University Case) • THE FORD-FIRESTONE CASE (NYU Case) • THE SMITH-THOMPSON INVESTMENT BANK CASE (NYU Case) • FIRST CITY NATIONAL BANK CASE (NYU Case) • XENON CASE (NYU Case) • BLUE SKY AIRLINES (INFORMS Case) • DELL DIRECT (Stanford Case).

Not all the cases above are going to be discussed in detail in class. For example, the Ford-Firestone Case and the Dell Direct case will not be discussed or mentioned in class. (You still may want to read them since they are not uninteresting.)

RECOMMENDED READING: The Goal, Third Edition (Buy in Bookstore), Eliyahu M. Goldratt and Jeff Cox, North River Press, Inc. 2004. VIDEOS: In the last two pages of this syllabus there are a number of links to youtube videos developed by faculty in our department on seven of the topics that are going to be covered in the course. Each topic has three videos associated with it. You may want to watch the first two videos of each one of the topics. The first one is an Introduction in the topic; the second one describes a problem in the particular area, referred to as Problem Walkthrough; the third one describes a possible Assignment (however, none of the assignments in the videos have to be done for this course).

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NYU CLASSES: We will be using NYU Classes a fair amount. Most of the time you will have to go to Resources. In Resources, you may have to go either to Case Folder, Documents or to External Links. In Documents, you are either interested in going to the particular Module we are covering in class at that time. COMPUTER SOFTWARE: EXCEL

HOMEWORK You will be assigned homework for each topic. The 8 homework assignments are due on the dates (sessions) where the assignments appear in the syllabus. Their due dates are Sessions 3, 6, 9, 13, 16, 22, 24, and 27. Only assignments that are specifically designated as SUBMIT are to be handed-in at the beginning of class (if by any chance you cannot make it to class, email us the homework before the beginning of class). Each homework assignment can be maximum 2 pages of text (1.5 spaced); it may contain one or two extra pages with figures or tables. Make sure to keep a copy of all homework submitted. Homework will be graded on the scale of (0, 0.5, 1, 1.5 and 2), and will not be accepted late. The assignments have to be prepared individually in order to receive credit. Please write clearly or word process your homework. You are allowed to discuss the general issues concerning the homework with one another. However, the details concerning the homework and the writing up of it, you have to do by yourself (so no two homeworks should look alike). Your total homework grade is computed by summing up the 7 highest marks you got on the 8 assignments.

QUIZZES A quiz might be given in any session. The quiz will relate to facts given in a case and study questions asked in the syllabus.

FINAL EXAM DATE OPMG-UB.0001.02: May …, …..

GRADING Class Participation, Attendance, Quizzes 15% Homework 15% Mid-Term Examination I (Session 11) 20% Mid-Term Examination II (Session 18) 20% Final Examination 30% (You are allowed to bring to the mid-terms and to the final one sheet (just one sheet!) of paper with notes. You may use both sides of the sheet.)

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HOW TO PREPARE FOR CLASS DISCUSSIONS

Please read the cases carefully. Use the study questions supplied in the syllabus as a guide. Be prepared to be called-upon to present the facts of the case, or to carry out the analysis indicated by the study questions. Class attendance and participation will be graded on the scale of (0,2), where 1 is for attending without participating, 1.5 is for contributing some to class discussion, and 2 for a substantial contribution to class discussion.

USE OF LAPTOP COMPUTERS IN CLASS You are only allowed to use laptop computers in class under the following conditions:

o You send me an email in advance notifying me that you will be using a laptop. o You have to sit in the very last row in the class o Within 10 minutes after the class is over, you have to email me the notes you made

on your laptop. Texting and emailing during class is not allowed.

HONOR CODE I expect every student to be familiar with the Stern School of Business Honor Code. Some of the ways in which the code applies to this course are discussed below:

• The honor code stipulates that no student will lie, cheat, copy or otherwise behave in an unfair manner to obtain academic advantage over other students. • As per the honor code, an individual’s name on a report should be included only if they have contributed to the analysis. If an individual has not contributed to the analysis in an intellectual manner, it is a violation of the honor code to include his or her name. • Furthermore, you may not refer to case write-ups from classes offered in earlier semesters. • The premise of the honor code is that ideas should be attributed to their source. Therefore, please acknowledge the main source(s) of data, facts, and ideas (other than from the instructor or textbook) in all your written work and when you make a presentation. If you use material from a source other than the lecturer, the textbooks or the lecture notes, you must attribute the source. For example, say, “I discussed this with the TA.” Or “I obtained this from the following website.” • You may discuss the homework with your classmates, TA or me. However, you must do them individually. The discussion is limited to “how to solve” type of questions. The actual solution must be done individually. Do not be worried of getting the answer incorrect in the homework. Most of the points will be given for using the correct approach.

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CLASS SCHEDULE

Jan 25 (Mon) SESSION 1: INTRODUCTION – OPERATIONS AS A SOURCE OF

COMPETITIVE ADVANTAGE

1. Introduction to Operations Management – Course Introduction and Overview. 2. We will be discussing Operations at UPS. Read the document UPS and Fedex Airhubs,

available on NYU Classes under Resources/Documents/Module 1. Watch the video “UPS Operations” available under Resources/External Links. Read also the Economist article “Just in Time Lobsters” also available under Resources/Documents/Module 1.

3. Read the first 12 pages of Analysis of Operations. Available on NYU Classes under Resources/Case Folder

4. Recommended reading : The Goal by E.M. Goldratt Jan 27 (Wed) SESSION 2: PROCESS DESIGN - TYPES OF OPERATING PROCESSES (PRODUCT-PROCESS MATRIX)

1. Read again Analysis of Operations (under Resources/Case Folder) 2. Watch the videos Process Analysis and Capacity (for the links, see the last two pages of

this syllabus).

Feb 1 (Mon) SESSION 3: PROCESS ANALYSIS – KRISTENS COOKIES CASE

1. Read, analyze and be prepared to discuss the Kristen's Cookie Company case (Resources/Documents/Case Folder) utilizing the six key questions at the end as a guide. In particular prepare the question: What are the cycle time, throughput time, and capacity of each operation and the whole production system? Use also the Practice Questions for Kristen’s Cookies which you can download from NYU classes (Resources/Case Folder) as a guide for your analysis of the case.

2. Homework #1: Assume that Kristen and her roommate are working every evening exactly 4 hours (not one minute longer). Assume that all orders that come in are custom made for one dozen cookies: a) How many orders can Kristen and her roommate fulfill in one evening? b) What is the minimum number of trays that Kristen and her roommate need to ensure

a smooth operation?

Feb 3 (Wed) SESSION 4: PROCESS DESIGN (SERVICE OPERATIONS)

1. Read Operations in Financial Services. (under Resources/documents/Module 1)

Michael Pinedo Page 6 Operations Management – Spring 16 Prof: Michael Pinedo

Feb 8 (Mon) SESSION 5: PROCESS ANALYSIS -- PANAMA CANAL CASE

1. Read, analyze, and be prepared to discuss the Panama Canal case (Resources/Case Folder). Read also the Panama Canal Readings which is under Resources/Documents/Module 1. There are also many videos on the Panama Canal on Youtube.

2. Prepare the following questions for discussion in class. In the questions below, assume in questions (a) and (b) below that the canal only operates in one direction (in reality, the canal works for half a day in one direction and for half a day in the reverse direction). (a) Describe the canal as an operating system and draw a process flow diagram. List the various steps (stages) of the transit process. (b) Try to compute the capacity of the Gaillard (Culebra) cut while it is operating in one specific direction. Which (shipping) parameters and which dimensions of the cut determine the capacity of the cut? (c) Suppose that the Culebra Cut has to reverse direction. How much capacity is lost because of the reversal? (d) Try to estimate the capacity of each step of the process (i.e., how many ships (transits a day)). What do you think is the bottleneck of the process?

Feb 10 (Wed) SESSION 6: PROCESS ANALYSIS -- NATIONAL CRANBERRY CASE

1. Read the National Cranberry case.

Homework 2: a) Draw a process flow diagram for the process fruit operation of RP #1. Based on the

data in Exhibit 1, what is the arrival rate (in barrels per hour) for wet and dry berries during the day? What are the implications for the operations of the plant?

b) Identify the problems at NCC. How severe are these problems? Answer the following questions:

o Identify any possible bottleneck(s) in the process. o Should the fifth dumper have been purchased? Justify your answer.

c) NCC is considering selling either one or two dumpers to create more space for trucks waiting to unload. In addition, NCC is considering reserving one dumper for trucks bringing dry berries and have the three (or two) remaining dumpers for the trucks bringing wet berries. Evaluate each one of these alternatives.

Submit this analysis at the beginning of the class. Feb 15 (Mon) PRESIDENTS’ DAY – No Stern Classes

Feb 17 (Wed) SESSION 7: THE BASIC LINEAR PROGRAMMING (LP) PROBLEM

1. Read Introduction to Linear Programming (available on NYU Classes under Resources/Documents/Module 2.)

2. Prepare in advance for discussion in class: Problems to be formulated as LPs (available on NYU Classes).

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Feb 22 (Mon) SESSION 8: SOLUTION TECHNIQUES: GRAPHICAL METHOD AND ENUMERATION OF CORNER POINTS

1. Read once more Introduction to Linear Programming (available on NYU Classes) 2. We will discuss the Graphical Method and the Corner Point Enumeration method in

class. We furthermore get into sensitivity analysis and shadow pricing. 3. Solve the five problems in the document LP Basic Problems that is posted on NYU

Classes in Module 2. Feb 24 (Wed) SESSION 9: LP SOLUTION (EXCEL INTERPRETATION)

1. Homework #3: Solve and submit Problems 2 and 3 of Homework #3 that is posted on NYU Classes (Resources/Assignments).

Feb 29 (Mon) SESSION 10: USING THE LP MODEL AND MIDTERM REVIEW

1. Review of all the material of Modules 1 and 2

Mar 2 (Wed) SESSION 11: TIME BASED COMPETITION

1. Read Critical Path Method by Anderson and Hales (available on NYU Classes under Resources/Documents/Module 3)

2. Read FCN/Securities Demo (A) (available in the Case Packet on NYU Classes). Mar 7 (Mon) SESSION 12: Midterm Exam I (Covering Modules 1 and 2) Mar 9 (Wed) SESSION 13: PROJECT MANAGEMENT

1. Read, analyze and be prepared to discuss the other four project management network cases (exercises) assigned in class: FCN (B), FCN (C) (on NYU Classes), Specialty Contractors, and Aerospace Components (on NYU Classes).

2. Homework #4: Draw the networks for the projects described in the FCN/Securities Demo (A) exercise (on NYU Classes).

Mar 14-Mar 20 SPRING BREAK – No Stern Classes

Mar 21 (Mon) SESSION 14: QUALITY – DEFINITION AND BASIS FOR COMPETITION

1. Preview of the next half of the course. 2. Read Statistical Process Control by Nelson Fraiman (available on NYU Classes)

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Mar 23 (Wed) SESSION 15: STATISTICAL QUALITY CONTROL

1. Read Statistical Process Control by Nelson Fraiman (available on NYU Classes) 2. Read the Ritz-Carlton Case (available on NYU Classes)

Mar 28 (Mon) SESSION 16: QUALITY IMPROVEMENT

1. Read, analyze and be prepared to discuss the quality control issues concerning Ritz-Carlton.

2. Homework #5: Consider the Ritz-Carlton case. The Excel file ritz.xls contains a listing of subset of all defects reported in the DQPR for the Ritz-Carlton Buckhead over a given period. The subset contains all defects for twelve categories of defects that directly impact the customer and are identified as causes for customer dissatisfaction. Analyze this data file and answer the following questions in at most 2 pages due at the start of class:

(a) What is Ritz-Carlton’s business strategy, e.g. who are their primary customers? Describe the differences between the R-C strategy and that of the Four Seasons.

(b) How is quality defined at R-C? Does the data in the file ritz.xls indicate any significant quality problems?

(c) If you were to select a category of defect to address from the DQPR data, which category would you address? Why?

(d) For whatever defect category you selected, construct a P-chart to help identify days on which some “assignable cause” of added defects arose.

(e) Using the results of your analysis and any other relevant tools of quality, as well as your common-sense knowledge of hotel operations, generate hypotheses about the possible root causes of the defect category that you selected.

Mar 30 (Wed) SESSION 17: QUALITY ANALYSIS, MEASUREMENT AND IMPROVEMENT

1. Read the Smith-Thompson case (available on NYU Classes). 2. Prepare for discussion in class Exercises 1 and 2 of the Smith-Thompson case. Which

factor(s) have the largest effect on the total expected losses? 3. Watch the videos “Quality” (the links are on the last two pages of this syllabus).

Apr 4 (Mon) SESSION 18: Midterm Review (Modules 3 and 4)

Apr 6 (Wed) SESSION 19: INVENTORY / LOGISTICS

1. Read Economic Order Quantity Model by Schwarz (available on NYU Classes) 2. Watch the Video on “Inventory” (for the link, see the last two pages of this syllabus).

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Apr 11 (Mon) SESSION 20: Midterm Exam II (Covering Modules 3 and 4)

Apr 13 (Wed) SESSION 21: THE ROLE OF INVENTORY - THE TRADITIONAL VIEW

1. Read, analyze and be prepared to discuss the Xenon case (on NYU Classes). Apr 18 (Mon) SESSION 22: INVENTORY MANAGEMENT UNDER UNCERTAINTY

1. Homework # 6: Consider the Xenon Case.

a) Consider the case with 4 regional warehouses with nonrandom demand. Compute the reorder point for one of the warehouses when the lead time L is 7 weeks.

b) Consider now the case with one centralized warehouse with nonrandom demand. Compute the reorder point when the lead time L is 11 weeks.

2. Read, analyze and be prepared to discuss the L.L. Bean Inc. case.

Apr 20 (Wed) SESSION 23: INVENTORY IN ACTION: THE BEER GAME ROOM: Abbe Bogen (11th floor of KMC) Apr 25 (Mon) SESSION 24: SUPPLY CHAIN MANAGEMENT

1. Debrief of the Beer Game 2. Watch the video “Supply Chain Management” (for link, see the last page of syllabus) 3. Read the Dell Direct Case (available on Blackboard). 4. Homework #7: The excel file LLBean.xls (download) contains demand and forecast

data for 84 items. Suppose that these are the data that L.L. Bean will use to plan their next season. Consider an item that retails for $40 and costs LL Bean $25. The liquidation price for this item is estimated to be $16. The sales forecast for this item is 13,000 units. What order quantity should L.L. Bean choose for this item?

Apr 27 (Wed) SESSION 25: PERISHABLE INVENTORIES – REVENUE MANAGEMENT

1. Read the LL Bean case again and also the Blue Sky Airlines Case (available in the case packet on NYU Classes)

May 2 (Mon) SESSION 26: THE EFFECTS OF UNCERTAINTY - WAITING LINES

1. Read Queueing Management and Models (available on NYU Classes under Resources/Documents/Module 6. )

2. Watch the videos “Queueing” (for the links, see the last two pages of this syllabus).

Michael Pinedo Page 10 Operations Management – Spring 16 Prof: Michael Pinedo

May 4 (Wed) SESSION 27: QUEUING THEORY IN ACTION Read, analyze, and be prepared to discuss the First City National Bank case (on NYU Classes). The following study questions will help:

a) Considering the data supplied for arrival and service times, how would you calculate an average arrival rate and service rate?

b) As Mr. Craig, what characteristics of this queuing system would you be most interested in observing?

c) What is the best number of tellers to use? d) Calculate the waiting time for a customer (time spent in the queue before service) and

determine which of the two line configurations you would recommend? Support your result with the appropriate quantitative queuing analysis.

Homework #8: The registration area has just opened at a large convention of building contractors in New York. There are 400 people arriving per hour (exponential interarrival times), and their cost of waiting in queue is valued at $40 per person per hour. The NY Convention Bureau provides servers to register guests. The cost (salary) of a server is $15 per hour. It takes about 1 minute to register an attendee (exponentially distributed). A single waiting line with multiple servers is set up. a) What is the minimum number of servers for this system? b) What is the optimal number of servers for this system from a cost perspective? c) What is the cost for the system, per hour, with the optimum number of servers? d) What is the server utilization rate with the minimum number of servers?

May 9 (Mon) SESSION 28: USE OF SIMULATION AS PROBLEM SOLVING TOOL -- REVIEW OF COURSE MATERIAL

1. Read Intro to Simulation by J. Banks (available on NYU Classes) 2. Consider the First City National Bank case again (on NYU Classes). By hand, simulate

25 arrivals (track them through the bank) using the inter-arrival time distribution and service time distribution given in the case, with three tellers, for each of the two line arrangements. Identify assumptions that are necessary? What are the advantages of using simulation to study this operation? What are the limitations? Which alternative arrangement of teller lines should Mr. Craig select based on the simulations?

FINAL EXAM DATE

OPMG-UB.0001.002: May ….. 10:00 am -- 11:50 am

Michael Pinedo Page 11 Operations Management – Spring 16 Prof: Michael Pinedo

VIDEO LINKS

Below there are a number of links to youtube videos developed by faculty in our department on seven of the topics that are going to be covered in the course. Each topic has three videos associated with it. You may want to see the first two videos of each one of the topics. The first one is an Introduction in the topic. The second one describes a problem in the particular area, referred to as Problem Walkthrough. The third one describes a possible Assignment.

1- Process Analysis and Capacity https://www.youtube.com/watch?v=kqWozEjl_kw&index=1&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=3A7FW9b-uSw&index=2&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=Gtys0zk4y0w&index=3&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A

2- Quality https://www.youtube.com/watch?v=3HBx_N7_tz0&index=18&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=UU1i9EJerKI&index=17&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=cbRRH2yFpbQ&index=16&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A

3- Inventory https://www.youtube.com/watch?v=kGPr9oeN0MQ&index=10&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=JCt1IVSjsuM&index=11&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=pIOzdftXsXc&index=12&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A

Michael Pinedo Page 12 Operations Management – Spring 16 Prof: Michael Pinedo

4- Supply Chain Management

https://www.youtube.com/watch?v=Gf-d5mIl0zs&index=9&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=I3daWQOaHc8&index=8&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=4RwT_VfS4KE&index=7&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A

5- Revenue Management https://www.youtube.com/watch?v=yutHhJgSC-4&index=13&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=4SfMx3pVMgo&index=15&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=YokEJc5yO-4&index=14&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A

6- Queueing https://www.youtube.com/watch?v=EXimUhimeTw&index=4&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=ptFlL2UaKkA&index=5&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=7xv6F_wbCNk&index=6&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A

7- Simulation https://www.youtube.com/watch?v=jNEE7ywKODM&index=19&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=2oT9cuf3CZ8&index=20&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A https://www.youtube.com/watch?v=CVh-8cvZiz4&index=21&list=PLue8TeHAyWZEwHr6D1fcC-zrdxM9DiQ4A